why most startups fail

Over 62% of all businesses in the U. S are small businesses (with less than 5 employees). That’s according to the U.S. Small Business Administration. Roughly 540,000 Americans become new business owners every month. Out of these only, a meagre 10% succeed. That means 90% of all startups launched in this country are going down the drain. But why? This article explores some of the common reasons why 90% of startups fail.

1. The Idea Was Never Good Enough

Who doesn’t have a business idea running in their mind right now? It’s one thing to have a business idea, and another to have an idea that really solves a big problem. Some of the most successful startups were businesses that solved a really big problem. Think of Facebook and their ability to make online social networking bliss, or Google and their power to make information access the least of your worries. Many startups fail because they don’t have a solution to a problem that is big enough (or that affects a lot of people). It’s important for entrepreneurs to rethink their idea and market viability before blindly letting the ship sale.

2. Financial Problems

Of course, this is expected. Hundreds of thousands of startups fail every month because they someone cannot manage to survive tough financial times. Entrepreneurs should carefully think about their cash options. Does giving a piece of the pie away help the business stay afloat? Is the budget properly optimized to take the firm through till such a time when a profit can be turned. What strategies for obtaining funds or generating revenue (in the near future) are there? Are these strategies good enough?

3. The Team is Not Good Enough

If there’s a crack in the team, then there’s a crack in the business – because after all, a business is all about the people running it. Many startups fail because the founders disagree and can’t get along well. Others fail because the entrepreneur doesn’t take the time to hire employees that really add value to the business. If you’re looking to build a business that can weather the storm during hard times, leadership and effective management are very crucial.

4. Inability to Take on the Competition

In almost every industry, there’s serious competition for people who are looking to launch a new business. It’s often hard to topple the status quo. Think about it – stationery, kitchenware, electronics…many consumers already have brands that they trust. It takes serious work and a clever strategy to convince people to ditch these brands and go for your products. If a new business is not able to take on the competition, then there’s a very high probability that it will fail within its first 2 years.

5. Founders Get Stuck

According to Nicolas Cole, a business contributor at Inc.com, many startups fail because the founders get stuck and lack a sense of self awareness.

They want to scale their firms horizontally (which is easier) rather than vertically.

They fail to run hypotheticals that assume for the worst.

They make decisions about things they know little – or nothing – about.

They are unable to manage their personal emotional turmoil and thus take their feelings to work.

They tend to think that raising money will solve their problems.

They think they know a lot and try to prove it – rather than listening and paying attention to learn.

According to Mr. Cole, startup owners should refuse to get stuck on the original idea. They should be ready to pivot, learn, and adjust based on the existing conditions. This is very important because often – entrepreneurs become so wrapped up in their idea and vision that they lose the perspective. That’s why it’s often a good idea to seek venture capital from people who already understand your target market.

Being open-minded, flexible, and able to learn are some of the key factors that can make your startup a success. Make sure you do not ignore anything, and set up a team that can recover fast from the hard-knock of startup life.